Tuesday's Budget from the Labour Chancellor, Rachel Reeves, has been much anticipated, with plenty of speculation as to the changes it would announce.

Following the Budget announcement Nick Mullins, Chartered Surveyor and Environment Advisor for H&H Land & Estates outlines some of the most significant changes that will impact farmers, land owners, agricultural and rural businesses and the wider rural sectors.

"This is a disappointing budget. We knew the Chancellor wanted to make tax changes to generate £40 billion pounds to cover the previously announced '£20 billion black hole' apparently left by the previous government. As promised, there have been no changes to VAT, Employee National Insurance contributions and Income Tax, all as part of Rachel Reeves' pledge to protect 'working people'. Whether the full measure of financial and tax changes actually does protect working people is up for debate.

Inheritance Tax

Currently only 6% of estates pay inheritance tax. The Budget pledges to freeze the existing thresholds until 2030. This is an additional 2 years on the previous Conservative Government's commitment. The basic threshold of £325,000 remains along with the other thresholds for passing on a home.

However, one of the main and most significant changes that will affect rural landowners is to the Agricultural Property Relief and Business Property Relief. From April 2026 the combined first £1 million of agricultural and business assets will attract no Inheritance Tax at all. There is then a 50% relief on all agriculture property over £1 million, at an effective rate of 20%. According to the Chancellor this helps protect small family farms.

These two reliefs were previously separate and at 100% each. So, combining them and giving a relief of only 50% will have a significant impact on rural farms in the future. We recognise that this will affect the way many farmers and businesses plan for the future. The extent to which this actually helps small family farms is not clear.

There are also changes to the inheritance tax paid on inherited pensions and a 50% relief applies to all shares on the alternative investment market.

Stamp Duty Land Tax

For second homeowners there will be an increase in Stamp Duty Land Tax of 2% to 5% effective tomorrow (Thursday 31^st October 2024).

Capital Gains Tax

An increase to 18% on the lower rate and 24% on the higher rate. This is an increase of 8% and 4% respectively. The rates on residential property remain the same at 18% and 24%. Careful thought will be required on the disposal of assets.

Minimum Wage and National Insurance

The Chancellor has announced an increase in the Minimum Wage for employees aged 21 and over of 6.7% to £12.21/hr from April 2025. There is also an increase for 18-20 year olds and apprentices. Whilst beneficial for employees this obviously has a financial impact on businesses paying staff.

As previously stated, there is no change to employees' National Insurance contributions. However, the employers' contribution does increase by 1.2% to 15%. The threshold at which employers have to start paying the tax reduces to £5,000 (from £9,100). However, the employers allowance increases from £5,000 to £10,500. This impact will be felt by employers and for those now falling within the reduced threshold who will be required to begin paying the necessary contributions.

DEFRA Budget

It has now been announced this will be £2.4 billion for the next financial year, which is a reduction from previous years, and the wording of the announcement seems to pave the way for changes in future years.

Basic Payment Scheme Delinked Payments

Further reductions are being made to BPS delinked payments for next year.

The fastest subsidy reductions will apply to those who historically received the largest payments. For example, the top 4% of recipients — who received over £100,000 in BPS in 2020 — will receive no more than £8,000 by 2025. In contrast, most farmers, who began with less than £10,000 in payments, will see a gradual reduction in their delinked payments but will continue to have access to funding through SFI and other schemes. 

For 2025, the RPA will apply a 76% reduction to the first £30,000 of a payment, while making no payments for any portion of a payment above £30,000.  

For example, a payment of £40,000 would have a 76% reduction applied to the first £30,000 of the payment (a reduction of £22,800). A 100% reduction would be applied to the next £10,000 (a reduction of £10,000). The payment would be reduced by £32,800 to £7,200.  

This should surely see increases to SFI and stewardship rates, but we cannot predict this.

No Changes

Along with a range of other tax changes and financial pledges, there are a couple of other areas that are worth noting which haven't changed for now. The 5p freeze on fuel duty has been extended and remains for the next year. In addition, Corporation Tax is capped at 25% with the Annual Investment Allowance maintained at £1 million.

We recognise that some of these changes will cause considerable concern for our clients, and H&H Land & Estates is ready to advise and help any clients of H&H Group Plc to fully understand the changes and their implications. We are prepared to work with you and other professionals to ensure your business and property are protected for the future.

Please contact your local office. We will be delighted to talk to you."